Pressure on North Sea as Iran prepares to up exports

IRAN plans to increase oil production by 500,000 barrels per day now that sanctions have been lifted, putting further pressure on North Sea output.

The price of a barrel of Brent Crude slumped to its lowest level since November 2003 at $27.69 yesterday.

It followed the weekend’s news that the West has dropped its economic sanctions against Iran, allowing the country to export oil freely and settling the dispute over the country’s nuclear programme.

Tehran’s deputy oil minister Roknoddin Javadi said yesterday Iran is determined to retake its market share, which plunged after sanctions were imposed in 2012.

Iran used to export 2.3 million barrels per day but its crude exports fell to one million in 2012. Oil prices have recently plummeted to under $30 (£21) a barrel, a 13-year low.

Mr Javadi said: “In the wake of removal of sanctions, Iran is prepared to increase its crude output by 500,000 barrels per day.”

He added that it will take a year to return to pre-sanctions production levels.

Barclays analysts Alia Moubayed and Michael Cohen told investors that the anticipated ramp-up in Iranian production comes “at a very bad time” for the oil market given the existing pressure on prices.

“It is too early to say what kind of market impact Iran’s return will have or how much of Iran’s return is already priced in,” they wrote.

“Our view is that Iranian wellhead production and sales from existing onshore and offshore storage will surprise the market initially, as the country shows its muscle, leading to downward price pressure.”